Microsoft's Australian cloud customers will be transferred out of the company's Asian data centres and into Australia when it finally opens up local facilities in NSW and Victoria.
A long time defender of global cloud services, Microsoft only two years ago preached the virtues of hosting client applications and data in its offshore facilities. But the market has changed.
In the last 18 months, US cloud darlings Amazon Web Services and Rackspace, plus local providers such as Ninefold opened up here, at the same time as Australian telcos recognised the importance of cloud computing and created local offerings. Today, Australian telcos say onshore cloud computing services are a critical part of their business.
And now Microsoft agrees.
"For sure this market is rapidly evolving. We have different offerings [and] sometimes different applications demand it. We thought it would be time for Windows Azure in Australia," Satya Nadella, Microsoft's president for server & tools, told IT Pro.
Azure is the company's platform-as-a-service and infrastructure-as-a-service cloud, used by developers to host and test their applications and by businesses to host their infrastructure including their virtual machines.
Nadella said only Windows Azure, and not Microsoft cloud applications such as Office 365 would be available here at this stage. He said the services would extend to third-parties who wished to use Microsoft's cloud to in turn provide services and build hybrid (public/private) clouds for their clients.
But John Brand, vice president and principal analyst at Forrester Research, said Microsoft had indicated to analysts it would also be supporting individual cloud applications such as Office 365.
"What they are doing here is classic Microsoft behaviour: announce something that doesn't quite exist, but get people excited so they can determine the demand, so they can pursue their strategy," Brand said.
He believes in future most of the demand will come from users wanting hosted applications such as Office 365, Exchange and SQL.
"They try to determine what that market demand does look like, then make the decision and the announcements," Brand said.
Nadella said the two undisclosed Australian locations would mirror each other for redundancy and disaster recovery. He said local clients would be transferred from the company's Singapore data centre in time.
He would not disclose how many people would be employed by the new facilities, or how much Microsoft was investing in its Australian cloud, but said the country was the first in a series of "vigorous" expansion plans.
Nadella was also mum on whether the new facilities belonged to Microsoft or would be co-located at third-party data centres, but Brand said they would be located within third-party facilities.
"Microsoft will not be owning and managing those data centres themselves; they'll be subcontracting," Brand said adding that it was still good news for local customers.
"It's good news for those organisations who have struggled with the desire to use Azure, but couldn't because they were offshore."
The need for data sovereignty is what drives some organisations to host their applications and/or data in Australia. The demand even drove Rackpace to set up a wholly-owned Australian subsidiary so it could promise to "not transfer customer-owned data from our Australia data centre to a law enforcement agency of another country (including the United States) without a customer's consent unless it is compelled to do so by Australian law."
Nadella would not go as far as to promise the same thing: "My own understanding is being a US company subject to whatever US laws apply to the local operation."
Toby Bowers, server and tools leader at Microsoft Australia, later confirmed to IT Pro that: "Delivering Windows Azure services from Australia will provide additional capability for Australian organisations to meet data sovereignty goals but like any corporation headquartered or doing business in the United States, we are subject to US laws."
But Bowers believed for the vast majority of organisations, the US Patriot Act would not be an everyday concern in terms of a move to the public cloud. The Anti-Terrorism Act facilitates, among other things, law enforcement's gathering of information derived from electronic surveillance.
Microsoft did not commit to a launch date or pricing for the new service.
Brand said if market demand proved strong as a result of Tuesday's announcement Microsoft "could probably bed down in nine to 12 months", but he said most organisations wouldn't be fully confident to move to the service until 2016.
And the longer the company took to make services available, the harder it would be to migrate customers who are already taking to other cloud service providers, he said.
"Once you are stuck in somebody's cloud it is quite difficult to get out," said Brand. "It doesn't matter the architecture or whether it's open, the more clients become entrenched in one platform or vendor in the next 18 months while they are working this out, the harder it will be for them to get people to churn."
He said Microsoft was "trying to put a competitive hold" on the market with the announcement, to effectively cause clients not yet committed to the cloud to wait until services were available.